Despite a scandal last year surrounding a stimulus fund that pulled back public investment and dented expansion somewhat, the Philippines has been enjoying a spell of enviable economic growth. With annual GDP growth rate of 6.1 percent in 2014 – the second highest in the Asia-Pacific region after China – the country has enjoyed its best three years of expansion since the mid-1950s. Manufacturing output is up, and stocks have rise to a record.

Late last month, the International Monetary Fund (IMF) provided its own growth of confidence. “The outlook for the Philippine economy remains favourable despite uneven and generally weaker global growth prospects,” it said in a statement, projecting 6.7 percent growth projection for Manila in 2015. Separately, economists polled by Reuters forecast 6.5 percent expansion for 2015, which would make it even faster than last year.

At the vanguard of this rapid growth are the Philippines’ largest conglomerates, like the SM Group of Companies, which has interests in shopping mall development and management, retail, real estate development, banking, and tourism and boasted a total market capitalization of 649 billion Philippine pesos ($15 billion) for 2014. “The Philippines is the second fastest growing economy in Asia and the SM Group of companies under its mother flagship, SM Investment Corporation (SMIC) is at the forefront of the strong growth,” says Marianne Malate-Guerrero, senior vice-president and head of the legal department at SMIC.

According to Malate-Guerrero, the economic boom has translated into various deals and opportunities for SMIC. “These developments come with the concomitant legal needs that have to be managed and addressed,” she says. “As such, the legal team of SM is expected to be able to anticipate these needs and address more complex relationships and deal structures.”

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With the increase in the number of deals being done by companies, companies are placing an increasing amount of importance on their legal staff for various aspects of transactional, as well as regulatory and compliance work. As a result, having the right legal structure is also key. In SM, says Malate-Guerrero, the legal team is housed with the mother company SMIC. “It provides shared services among its subsidiaries except for the banking subsidiaries since they are required under existing regulations to have their own legal risk officers,” she says.

“The larger subsidiaries of SMIC such as SM Prime Holdings, Inc. have a legal team that are embedded into the operations of the subsidiary. However, certain services, such as labor advisory, intellectual property administration, corporate housekeeping, defensive litigation and special projects are managed at the SMIC level.”

And with the increase in need for legal support, companies are also looking to bulk up their legal teams. “We anticipate a growing need for the bigger subsidiaries to develop a more robust legal team as their own operations expand,” says Malate-Guerrero. “It is my responsibility as Legal Head of SMIC to ensure that the needed structure to meet rising volume of work at the subsidiary level will still enable SMIC to exercise effective oversight over the legal affairs of these subsidiaries.”

Growing similarly in importance is being able to rely on trusted external counsel. For SM, the relationship with its external law firms is “very personal,” says Malate-Guerrero. “Trust and confidence apart from expertise is a necessary ingredient to starting and strengthening that relationship. It is expected that the external counsel will put forward commercially viable and practical solutions to legal issues and harness its network and skill sets to provide the best level of service.”

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By the end of this year, the Association of Southeast Asian Nations (ASEAN) will officially form a single regional economic block known as the ASEAN Economic Community (AEC). The 10 member states of the ASEAN aim for the AEC to unite the region with free movement of goods, services, investment, skilled labor and freer flow of capital.

While the benefits to the Philippines are fairly apparent – tariff reductions in key areas, foreign participation in key sectors, the exchange of know-how and skills in services, better distribution channels, improved transport and communications and more investments in real estate – companies also need to be prepared for it, including having a better understanding of the laws and regulations that will underpin it.

“The ASEAN integration, although readily seen down the horizon for the Philippine legal community, still provides a hazy pictureof how the foreign practice of law can be exercised in the Philippines,” says Malate-Guerrero. “Be that as it may, the legal teamof SM is simply expected to evolve in orderto harness the benefits of the integration.”

Philippine Deal Highlights in 2014


- Disclosed Philippine M&A deals totalled 346.3 billion pesos ($7.8 billion) in 2014, with approximately 126 transactions.

- Over the last three years, energy, TMT, consumer and financial institution sectors have consistently been leading industries for M&A activity.

- The market is dominated by a few large deals per year; however, average deal size is relatively small (2.7 billion or $62.2 million for 2014).






10.4 trillion pesos

10-15 percent in 2014


715.6 billion pesos

46 percent in 2014


557.4 billion pesos

17 percent (through 2016)

*Source: Investment & Capital Corporation of the Philippines

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GC Section: Rising ASEAN Tiger

by Ranajit Dam |

The Philippines is now Asia’s second-fastest growing economy, bringing with it both deals and opportunities. Ranajit Dam examines how in-house counsel are coping with – and capitalising on – these boom times